The 2016 SuperReturn Conference – Reflections from a German Headhunter
by Britta Bene
Amid this year’s notable market turmoil and ongoing economic uncertainty, the 19th annual SuperReturn conference in Berlin stood out like a beacon in troubled waters. Or at least it appeared as such from a distance. With equity markets in distress and DM yields extending into negative territory, the generous champagne receptions, lavish dinners, and an overall jovial atmosphere could – to the undiscerning eye – tell a tale of a carefree time. But as we all know, appearances can be deceiving.
Like seasoned sailors, the majority of attending sophisticated investors and GPs are making sure to harness the last few moments of decent weather not only to enjoy the sail but also to prepare for the changes that lie ahead. If it is a storm that is brewing on the horizon or a prolonged period of listless calm nobody truly knows. But there is a shared consensus that the weather is shifting and the various parties are beginning to adjust accordingly.
From a GP perspective, there is a clear sense of urgency to wrap up and secure fundraising activities. Everyone is aware of rising asset prices and the challenge to generate returns; a fact that is leading to heightened demand for seasoned fundraising professionals as well as talent that has a proven track record in sourcing and executing deals.
LPs, on the other hand, are torn between putting their cash piles to work and cinching the purse strings amid sky high valuations. From ZIRP to NIRP, large institutional investors are faced with terrible odds going forward (especially in Germany) and are looking to diversify their alternatives teams in order to weather the storm.
However, within the German landscape neither party is having an easy time finding suitable talent. Within large, institutional LPs, alternative investments historically enjoyed a shockingly small portfolio allocation. The results were small team sizes (if dedicated teams existed at all) and few resources spared for talent development and support. Of course there are glaring exceptions, but by and large there are simply not enough well trained LP alternatives investors to fill the growing demand for talent.
On the GP side there exists a dichotomy between highly sophisticated (often internationally trained) investment professionals and a more local breed of investor. And while both types have their firm place in the German GP landscape, it is those who have the ability to lead complex deals through an entire lifecycle (including sourcing!) that are most coveted and courted. Going forward, distressed debt, energy, and of course technology will be the sectors in which specialist investors will arguably gain the most traction.
Overall, it looks like the weather may yet hold a while longer. But amid shifting winds it is no surprise that more and more boats are headed toward harbor or are changing course.